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Court to Determine Scope of Attorney’s Obligations to Purchasers of Residential Real Estate

The New Jersey Appellate Division recently heard argument in the case of Bianchi v. Ladjen as to whether an attorney hired to represent a purchaser in a residential real estate closing is obligated to advise his client about purchasing homeowner’s insurance. The issue before the Court is whether it is sufficient for an attorney testifying as an expert in a legal malpractice case to refer only to his years of experience or an observation that such a duty is common practice to establish a standard of care. The trial court ruled that as a matter of law, absent an express agreement to the contrary, an attorney does not have a duty to advise a real estate purchaser client about purchasing optional homeowner’s insurance.

There have been significant changes in the way lawyers in New Jersey handle residential real estate closings. There was a time when the lawyer was heavily involved in all aspects of a residential purchase; the goal, of course, was to secure good title for his client. In October 2015, the Consumer Protection Finance Bureau promulgated new rules, which have reduced the role attorneys play in residential real estate transactions. Title companies now do the bulk of the work.

Given the decreased role of lawyers in the closing process, coupled with the lack of a defined standard of conduct or a specific agreement between the lawyer and his client, my sense is that the Court in Bianchi will decline to expand the lawyer’s responsibilities in this area of the law and affirm the ruling of the trial court.

Regardless of how the Court decides the matter, it is important for consumers purchasing residential real estate to have a written retainer agreement outlining their attorney’s responsibilities. You will be a better-informed consumer, and also avoid potential problems between yourself and your lawyer.

If you have any questions about this post or any other related matter, please contact me at tpmckeown@nmmlaw.com.